Price war may squeeze out smaller competitors

THE major banks are gearing up for an assault on the low-cost superannuation sector in an attempt to bolster their bottom lines as mortgage growth wanes.

The victims of a looming super price war will be traditional wealth management powerhouse AMP and smaller counterpart IOOF, according to industry experts.

Insiders have told BusinessDaily there is a strong and growing appetite for market share in the super sector. It has been triggered by the Federal Government's MySuper regulatory reforms and the need for banks to diversify their income streams, as growth from traditional sources such as mortgages remained lacklustre.

Late last year, ANZ launched its low-cost superannuation product Smart Choice Super. At the same time, Westpac has increased marketing of its low-cost option, Super For Life, sold through subsidiary BT.

The Westpac product has been on the market for about five years and boasts 326,000 clients and about $2.4 billion in funds under management. Analysts said the sector was poised to boom.

"We understand that the other major banks are close to responding with similar products," Commonwealth Bank analyst Ross Curran said.

Mr Curran said the MySuper reforms would take effect in July.

"We believe the major banks are likely to increase advertising spend around this event," he said.

With their extensive branch networks and marketing expertise, the banks would quickly gain a significant share of the market, Mr Curran said.

He has downgraded his rating on AMP and IOOF shares to "underweight".

"Increasing competition in (wealth management) platforms is likely to lead to AMP and IOOF underperforming relative to the rest of the ... sector.

"We believe pure players such as IOOF and AMP may be caught in the middle if the banks begin a price war on superannuation."

The banks were also pushing heavily into the market to lift the revenue they make from each customer, and extend their relationships with patrons.

"ANZ indicated that a bank customer with a wealth product generates 65 per cent more revenue and had 45 per cent less attrition than a customer without wealth (products)."